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LPL loses board member, pays CEO less than rivals

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LPL Financial’s Dan Arnold received a 155% raise after his promotion from president to CEO. His total 2017 pay of $7.4 million, which included a $2.2 million cash bonus, reflects a year the company says was marked by good results and the largest acquisition in its history.

The No. 1 independent broker-dealer disclosed its executive compensation March 29 in its annual proxy statement to shareholders. Board member Marco “Mick” Hellman also announced his decision not to seek re-election after funds managed by his firm have offloaded millions of LPL shares.

Hellman, a senior advisor to one of the private equity firms that took LPL public in 2010, did not explain why he’s leaving the board or return a request for comment placed at his firm, HMI Capital. His move to step down “did not result from any disagreement” with LPL, according to a separate March 29 SEC filing.

Arnold, 53, took over from retired longtime CEO Mark Casady last January and earned more than $2 million above Casady’s 2016 salary of $5.3 million. Even so, his pay falls far below the CEOs of the next two largest IBDs. Ameriprise CEO Jim Cracchiolo’s 2017 pay totaled $23.9 million, and Raymond James CEO Paul Reilly received $11.1 million.

In an email, LPL spokesman Jeff Mochal also noted a “very favorable” disparity for LPL in the section comparing the CEO’s pay to the median direct employee pay of $78,170. LPL’s ratio of 95-to-1 stood far below Ameriprise’s ratio of 223-to-1 and Bank of America’s ratio of 250-to-1.

Arnold’s cash bonus nonetheless came in at more than $300,000 over the company’s target of $1.8 million. The firm’s compensation committee based the bonus on LPL’s adjusted EBIDTA figures, its shareholder return relative to peers and other drivers of performance, the proxy shows.

LPL’s August acquisition of the assets of National Planning Holdings, alongside organic growth and market gains, boosted client assets by 21% to $615 billion last year. Adjusted EBIDTA jumped 20% to $636 million, and the firm returned $204 million to stockholders compared to $114 million in 2016.

The research firm’s annual survey included new queries reflecting changes in the industry.
March 29

In 2017, LPL “further positioned itself to better serve and support its advisors, drive profitable growth and create long-term shareholder value,” the proxy says.

Arnold’s pay stemmed from peer compensation, a consultant’s advice and the committee’s “assessment of Mr. Arnold’s role, experience and tenure,” the document states.

The committee also granted him a one-time restricted stock incentive worth $1.5 million “in recognition of the substantial additional responsibilities that Mr. Arnold assumed and his expected contributions to the company, and to reinforce Mr. Arnold's alignment to shareholders' interests.”

Casady received $172,148 in 2017 for the two months the firm says he provided transition services before the March 3 effective date of his retirement.

Arnold began 2017 with a base salary of $675,000 but received a raise to $800,000 after his appointment as CEO. His other pay consisted of a 401(k) employer payment of $14,040, and he took in no additional compensation in travel or cars. LPL ended its company car program for executives in 2016.

Hellman’s departure follows his mass sell-off. Funds managed by HMI have sold nearly three quarters of their holdings in LPL, or roughly 1.4 million shares, leaving them with 492,390 shares. Hellman & Friedman, a firm co-founded by Hellman’s father Warren, once controlled about a third of LPL.

LPL paid Hellman $211,118 in 2017, his second year on the board of directors, the proxy shows. His exit after the firm’s annual meeting in May will trim the board’s ranks to eight from nine under Chairman Jim Putnam, the former CEO of Global Portfolio Advisors and a onetime LPL executive.

“On behalf of the board, I thank Mick for his service to LPL and our stockholders,” Putnam said in a statement. “He has been an exemplary colleague and valued member of the board in helping to guide the company through a period of significant transformation and growth.”

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